SEC. 204. <<NOTE: 26 USC 401 note.>> ELIMINATING A PENALTY ON
PARTIAL ANNUITIZATION.
(a) Eliminating a Penalty on Partial Annuitization.--The Secretary
of the Treasury (or the Secretary's delegate) shall amend the
regulations under section 401(a)(9) of the Internal Revenue Code of 1986
to provide that if an employee's benefit is in the form of an individual
account under a defined contribution plan, the plan may allow the
employee to elect to have the amount required to be distributed from
such account under such section for a year to be calculated as the
excess of the total required amount for such year over the annuity
amount for such year.
(b) Definitions.--For purposes of this section--
(1) Total required amount.--The term ``total required
amount'', with respect to a year, means the amount which would
be required to be distributed under Treas. Reg. section
1.401(a)(9)-5 (or any successor regulation) for the year,
determined by treating the account balance as of the last
valuation date in the immediately preceding calendar year as
including the value on that date of all annuity contracts which
were purchased with a portion of the account and from which
payments are made in accordance with Treas. Reg. section
1.401(a)(9)-6.
(2) Annuity amount.--The term ``annuity amount'', with
respect to a year, is the total amount distributed in the year
from all annuity contracts described in paragraph (1).
(c) Conforming Regulatory Amendments.--The Secretary of the Treasury
(or the Secretary's delegate) shall amend the regulations under sections
403(b)(10), 408(a)(6), 408(b)(3), and 457(d)(2) of the Internal Revenue
Code of 1986 to conform to the amendments described in subsection (a).
Such conforming amendments shall treat all individual retirement plans
(as defined in section 7701(a)(37) of such Code) which an individual
holds as the owner, or which an individual holds as a beneficiary of the
same decedent, as one such plan for purposes of the amendments described
in subsection (a). Such conforming amendments shall also treat all
contracts described in section 403(b) of such Code which an individual
holds as an employee, or which an individual holds as a beneficiary of
the same decedent, as one such contract for such purposes.
(d) Effective Date.--The modifications and amendments required under
subsections (a) and (c) shall be deemed to have been made as of the date
of the enactment of this Act, and as of such date--
(1) all applicable laws shall be applied in all respects as
though the actions which the Secretary of the Treasury (or the
Secretary's delegate) is required to take under such subsections
had been taken, and
(2) until such time as such actions are taken, taxpayers may
rely upon their reasonable good faith interpretations of this
section.
